Making the Case for Health Care Price Controls

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“A growing number of studies suggest some cause for optimism” on health care costs, writes Robert J. Samuelson in The Washington Post.

Researchers have found that Medicare pays much less than private insurance for the same medical conditions. One interpretation of that research argues that “Medicare rates have been cut to artificially low levels” and private insurance rates have been jacked up to compensate for that. The other interpretation points to industry consolidation’s effects on the market: “Hospitals have merged. Doctors’ group practices have grown larger or been sold to hospitals. … The fewer providers there are, the harder it is for insurance companies to dictate terms to the survivors.”

The upshot: Scholars favor the market-power argument, which has been endorsed by the Medicare Payment Advisory Commission. And a recent piece by Paul Hewitt and Phillip Longman in Washington Monthly magazine proposes a “single price system” in which Medicare reimbursement rates would be imposed across the health care system. “We need to slow medical spending and relax the pressures on wages and other government programs,” Samuelson writes. “The recognition of the huge gap between Medicare and private reimbursement rates creates the opportunity to do that. We should take it.”